The Government proposes that employees entitled to holiday pay under the Holiday Pay Act may, upon request, receive a payment equivalent to approximately three weeks’ holiday pay as early as October 2020. However, it is also possible to leave the money in a pension savings scheme, with payouts upon reaching retirement age or when the employee permanently leaves the labour market in Denmark.
It is expected that employees will be able to apply for payouts around 1 October, so that the money can be paid out in October 2020. The exact deadlines for applications will be set out in a notice issued immediately after the Early Payouts Act is passed. The Act is expected to be passed in mid-August 2020.
The payouts will be offset against accrued holiday allowance funds
The accrual year for holiday allowance funds to be carried forward does not end until 31 August 2020, and employers have until 31 December 2020 to report the amount of the employees' holiday allowance accrued during the accrual year for each employee. Payouts cannot therefore be made on the basis of reports concerning the employee’s holiday pay accrual. This is because, for the vast majority of employees, the basis for accrual has not yet been reported at the time of the early payouts. To facilitate early payouts, information from the e-income register is used instead as the basis for payouts. This means that there may be discrepancies between the amount paid out, which is calculated on one basis, and the amount actually accrued during the period, which is calculated on a different basis. Discrepancies arise, for example, if the employee has income that is not covered by the entitlement to holiday pay under the Holiday Pay Act, and for which they are therefore not entitled to holiday pay.
It is the income earned during the period from 1 September 2019 to 31 March 2020 that will form the basis for calculating the holiday pay that may be paid out early.
Once employers’ reports for the entire holiday year from 1 September 2019 to 31 August 2020 are available, any holiday pay that has been paid out early must be deducted from the employee’s outstanding holiday pay entitlement, and the remainder will be held in the fund until the employee reaches retirement age or otherwise becomes eligible for payouts. If, following reporting and deduction of the early payouts, the employee’s account balance is found to be negative, the overpayment will be reclaimed.
